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Practice Midterm

Practice Midterm

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Published by misstonia

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Published by: misstonia on Jun 28, 2011
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10/16/2014

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Chapter #1
1.Estimated goodwill is determined by computing the present value of theA)average earnings.B)excess earnings.C)expected future earnings.D)normal earnings.2.Which of the following statements would not be a valid or logical reason for enteringinto a business combination?A)to increase market share.B)to avoid becoming a takeover target.C)to reduce risk by acquiring established product lines.D)the operating costs of the combined entity would be more than the sum of theseparate entities.3.The parent company concept of consolidation represents the view that the primary purpose of consolidated financial statements is:A)to provide information relevant to the controlling stockholders.B)to represent the view that the affiliated companies are a separate, identifiableeconomic entity.C)to emphasis control of the whole by a single management.D)to include only a portion of the subsidiary's assets, liabilities, revenues, expenses,gains, and losses.4.Which of the following statements is correct?A)Total elimination is consistent with the parent company concept.B)Partial elimination is consistent with the economic unit concept.C)Past accounting standards required the total elimination of unrealized intercompany profit in assets acquired from affiliated companies.D)none of these.
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5.Under the parent company concept, consolidated net income __________ theconsolidated net income under the economic unit concept.A)is the same asB)is higher thanC)is lower thanD)can be higher or lower than6.Under the economic unit concept, noncontrolling interest in net assets is treated asA)a liability.B)an asset.C)stockholders' equity.D)an expense.7.The parent company concept adjusts subsidiary net asset values for theA)differences between cost and fair value.B)differences between cost and book value.C)total fair value implied by the price paid by the parent.D)total cost implied by the price paid by the parent.8.According to the economic unit concept, the primary purpose of consolidated financialstatements is to provide information that is relevant toA)majority stockholders.B)minority stockholders.C)creditors.D)both majority and minority stockholders.9.Which of the following statements is correct?A)The economic unit concept suggests partial elimination of unrealized intercompany profits.B)The parent company concept suggests partial elimination of unrealizedintercompany profits.
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C)The economic unit concept suggests no elimination of unrealized intercompany profits.D)The parent company concept suggests total elimination of unrealized intercompany profits.10.When following the parent company concept in the preparation of consolidated financialstatements, noncontrolling interest in combined income is considered a(n)A)prorated share of the combined income.B)addition to combined income to arrive at consolidated net income.C)expense deducted from combined income to arrive at consolidated net income.D)deduction from current assets in the balance sheet.11.When following the economic unit concept in the preparation of consolidated financialstatements, the basis for valuing the noncontrolling interest in net assets is theA)book values of subsidiary assets and liabilities.B)fair values of subsidiary assets and liabilities.C)general price level adjusted values of subsidiary assets and liabilities.D)fair values of parent company assets and liabilities.12.The view that consolidated financial statements represent those of a single economicentity with several classes of stockholder interest is consistent with theA)parent company concept.B)current practice concept.C)historical cost company concept.D)economic unit concept.13.The view that the noncontrolling interest in income reflects the noncontrollingstockholders' allocated share of consolidated income is consistent with theA)economic unit concept.B)parent company concept.C)current practice concept.
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